bridge report pressance corporation co., ltd. (3254) report [2q...share price number of shares...

Bridge Report (3254) December 11, 2018 http://www.bridge-salon.jp/company_e

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Bridge Report Pressance Corporation Co., Ltd. (3254)

－ Stock Information －

Share Price Number of shares issued Total market cap ROE

(Actual) Trading Unit

¥1,486 62,818,585 shares ¥93,348 million 20.8% 100 shares

DPS (Est.) Dividend yield

(Est.) EPS (Est.) PER (Est.) BPS (Actual) PBR (Actual)

¥35.00 2.4% ¥269.09 5.5 times ¥1,221.10 1.2 times

*The share price is the closing price on December 10. The number of shares issued was taken from the latest brief financial report.

ROE and BPS are the values for the previous fiscal year.

－ Earnings Trends － (Unit: Million yen or yen)

Fiscal Year Net Sales Operating Profit Ordinary Income Net Income EPS DPS

Mar. 2012 (Actual) 36,998 7,613 7,464 4,096 68.10 35.00

Mar. 2013 (Actual) 42,349 9,393 9,329 5,351 88.95 35.00

Mar. 2014 (Actual) 51,755 10,334 10,264 6,286 103.44 50.00

Mar. 2015 (Actual) 65,641 12,262 12,065 7,758 126.27 50.00

Mar. 2016 (Actual) 78,990 14,057 13,798 9,194 152.31 60.00

Mar. 2017 (Actual) 101,083 15,645 15,414 10,526 178.99 84.60

Mar. 2018 (Actual) 134,059 20,362 19,858 13,757 232.58 29.40

Mar. 2019 (Forecast) 152,471 24,541 23,661 16,132 269.09 35.00

* The forecast is from the company.

*4-for-1 share split was conducted on Oct. 1, 2016. EPS has been revised retroactively.

*From the FY 3/16, net income is profit attributable to owners of the parent. Hereinafter the same applies.

This report introduces Pressance Corporation’s earnings results for the first half of fiscal year ending March 2019, etc.

― Table of Contents ―

1. Company Overview

2. First Half of Fiscal Year ending March 2019 Earnings Results

3. Fiscal Year ending March 2019 Earnings Forecasts

4. Interview with Vice President Doi

5. Conclusions

<Reference1: Medium Term Management Plan>

<Reference2: Corporate Governance>

President Shinobu Yamagishi

Company Pressance Corporation Co., Ltd.

Code No. 3254

Exchange TSE 1st Section

Industry Real estate business

President Shinobu Yamagishi

Address Crystal Tower, 1-2-27 Shiromi, Chuo-ku, Osaka

Year-end End of March

URL http://www.pressance.co.jp/ir/ir6.html#english


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Key Points

・The sales for the second quarter of the fiscal year ending March 2019 were 121.3 billion yen, up 83.2% year on

year. Sales continued to be favorable. Operating profit was 25.7 billion yen, up 134.6% year on year. SG&A

expenses augmented 23.3% year on year, but they were offset by increased sales, resulting in a substantial rise in

profits.

・No change has been made to the forecast for the fiscal year ending March 2019. Sales are expected to be 152.4

billion yen, up 13.7% year on year. Gross profit margin is forecasted to rise 1.6 points due to greater sales of studio

condominiums, which have a low cost rate. SG&A expenses will also augment due to the increase of employees but

will be offset by sales growth. Operating profit is projected to be 24.5 billion yen, up 20.5% year on year. The

annual dividend per share is forecasted to be 35.00 yen. Dividend payout ratio is expected to be 13.0%.

・Pressance delivered a large number of studio and family-type condominiums as per the initial plan, and the sales

of condominium buildings and hotel property make favorable progresses as well.

・The progression rate of the condominium sale business at the end of September 2018 was 98.9%. A high

progression rate (rate of securing target sales) is a feature of the company. For the fiscal year ending March 2019,

the rate is higher than previous two fiscal years also at the beginning of the third quarter.

・A few scandals that were detected related to investment properties only highlighted the strengths of Pressance.

・As Pressance’s “strong selling power,” which is one of its strengths, allows sales staff members to build up

successful experiences under a favorable market environment, sales staffs are able to grow faster, and some of the

new employees are already acting as important forces of the company only 6 months after they joined. This is

resulting in further strengthening of the selling power in addition to much lower turnover rate, and the operating

base is becoming more solid.

・As Pressance will most likely attain the goals for the whole fiscal year, its stock price, which has been trending

down for long, is finally reversing its course while TOPIX fell to the lowest level since the beginning of the year.

We would like to watch the future trend.

1. Company Overview

Pressance Corporation is an independent condominium developer that plans, develops, sells and manages family-type and

studio condominiums mainly in the Kinki and Tokai-Chukyo regions, based on the business model of “creating high

added value for real estate.” The company supplies the largest number of condominium units in the Kinki region for the

eight consecutive years as well as Tokai-Chukyo region for the six consecutive years. In Japan, the company was ranked

in the 2nd place. Its major strengths include plentiful experience of supplying condominiums, large market share,

outstanding sales capabilities, sound financial position and an excellent product appeal.

【Corporate history】

President Shinobu Yamagishi, who had accumulated experience in a leading condominium developer, established Nikkei

Prestige Co., Ltd., the predecessor of Pressance Corporation, for the purpose of conducting real estate business in October

1997. The company released the first original brand condominium “Pressance Namba East” in 1998, and then the first

originally developed condominium “Pressance Shinsaibashi East” in 2000, accumulating experience steadily.

In 2002, the company was renamed “Pressance Corporation Co., Ltd.” From the Kinki region, the company expanded its


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business area and released “Pressance Nagoyajo-mae,” the first originally developed condominium in the Tokai area, in

2003, expanding its operations steadily. Then, it was listed on the second section of Tokyo Stock Exchange in December

2007.

In 2008, it opened Tokyo Branch, commencing business operation in the Tokyo Metropolitan Area. Thanks to the steady

expansion of its business, the company withstood the effects of the bankruptcy of Lehman Brothers and kept growing.

Then, it was listed on the first section of the Tokyo Stock Exchange in October 2013.

【Corporate ethos】

The “Light up your corner” spirit

“Light up your corner” is a teaching by one Buddhist monk called Saicho, the founder of Enryaku-Ji Temple in Shiga

Prefecture and the Tendai sect of Buddhism. The slogan means that each and every individual should try their hardest in

their own place and shine a light around by working for others, which in turn will brighten up society as a whole and

eventually bring peace and happiness to the whole world. It is the original and still valid company motto proposed by

President Yamagishi, himself a Shiga native.

Business development starting with the “light up your corner” spirit

Since our founding in 1997 when we started out by “shining light into one corner” of the areas in which we were

involved, our company has always strived to enhance the value of those areas and with our unswerving and constant

activities we managed to expand our business range into the Tokai-Chukyo, Tokyo Metropolitan and Okinawa areas, and

we are planning further expansion not only nationwide, but also overseas.

Business model nurtured by the “light up your corner” spirit

If our corporate activities manage to shine a light even on one small corner of society, it will brighten up the people

around it, bringing happiness to society as a whole. Our company’s business model of “creating high added value for real

estate” expresses our determination to do our best to this end.

Spirit of “good for 3 parties” derived from the “light up your corner” spirit

When each of our employees tries their very best in a given place, and “shines a light on one corner,” the other people

will also shine brightly, as will the surrounding. This is also connected to the spirit of “good for 3 parties” – good for

sellers, buyers and the public – and with this spirit, we are going to build trust and sound relationship with all

stakeholders to contribute to communities and societies.

From lighting up “your corner” to “your society”

“Lighting up your corner” is not merely a self-contained philosophy limited to people and corporations, but one that

should expand into lighting up “societies.” At our company, we take our social mission very seriously, and we aspire to

achieve sustainable growth by positively practicing the activities stemming from governance, compliance, fair customs

and environmental considerations.

(From the company’s website)

Additionally, the company places a great value in “each and every individual trying their hardest in their given place” and

has the idea of “Accomplishing ordinary tasks thoroughly and carefully enables us to achieve extraordinary

results” as the guideline for the whole company.

【Market environment, etc.】

◎ Market environment

According to data provided by the company (Source: Real Estate Economic Institute), the number of condominium units

provided during 2017 in the Kinki area is 19,560, and that in Tokai-Chukyo area is 4,753.

Pressance has provided 3,845 units in the Kinki area and 1,322 units in the Tokai-Chukyo area. It has held the number

one market share in the Kinki area for eight consecutive years and in the Tokai-Chukyo area for six consecutive years.

It is the second largest provider of condominiums in Japan; with a total of 5,267 units nationwide.


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Ranking for the supply of condominiums for sale by areas in 2017

The Kinki region The Tokai-Chukyo region

Rank Corporate name No. of

units Rank Corporate name

No. of

units

1 Pressance Corporation 3,845 1 Pressance Corporation 1,322

2 Nihon Eslead Corp. 2,017 2 Yahagi Jisho Co.,Ltd. 272

3 Sumitomo Realty & Development Co.,

Ltd. 968 3

Nomura Real Estate Development Co.,

Ltd. 262

4 Nomura Real Estate Development Co.,

Ltd. 769 4 Daiwa House Industry Co.,Ltd. 244

5 Nissho Estem Co.,Ltd. 759 5 Daikyo Incorporated 227

Japan

Rank Corporate name No. of

units

1 Sumitomo Realty & Development Co., Ltd. 7,177

2 Pressance Corporation 5,267

3 Nomura Real Estate Development Co., Ltd. 5,158

4 Mitsui Fudosan Residential Co., Ltd. 3,787

5 Mitsubishi Jisho Residence Co., Ltd. 3,101

（Source: Real Estate Economic Institute）

◎ Competitors

Below is a comparison between Pressance Corporation and major competitors from various aspects.

(unit: million yen)

Code Corporate name Sales Ordinary

income

Total

assets

Real estate

for sale (A)

Real estate in

process for sale

(B)

Interest-bearing

liabilities

1925 Daiwa House Industry Company,

Limited 3,795,992 344,593 4,035,272 556,056 140,049 780,571

1928 Sekisui House, Ltd. 2,159,363 203,678 2,419,012 968,638 109,480 616,339

3231 Nomura Real Estate Holdings, Inc. 623,762 68,033 1,673,692 102,884 261,278 877,800

3254 Pressance Corporation 134,059 19,858 245,399 11,275 180,461 142,494

3289 Tokyu Fudosan Holdings

Corporation 866,126 68,691 2,176,761 207,705 260,138 1,210,375

8804 Tokyo Tatemono Co., Ltd. 266,983 39,416 1,441,050 77,636 67,678 809,385

8830 Sumitomo Realty & Development

Co., Ltd. 948,402 186,870 5,186,901 380,735 395,730 3,257,760

8840 Daikyo Incorporated 335,184 19,789 276,661 49,748 47,174 26,497

8877 Nihon Eslead Corp. 48,340 6,703 63,304 1,664 28,453 14,448

8897 Takara Leben CO., LTD. 110,851 11,792 177,975 20,279 44,068 106,442


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(units: million yen, times.)

Cod

e Corporate name

Inventory

asset ratio

(A ÷ B)

Capital-

to-asset

ratio

Dependence on

interest-bearing

debts

Ordinary

income

margin

ROE Market

cap

Estimated

PER PBR

1925 Daiwa House Industry

Co., Ltd. 397.0% 36.5% 19.3% 9.1% 17.0%

2,276,535 9.5 1.5

1928 Sekisui House, Ltd. 884.8% 49.4% 25.5% 9.4% 11.6% 1,131,339 8.9 0.9

3231 Nomura Real Estate

Holdings, Inc. 39.4% 30.0% 52.4% 10.9% 9.4%

416,665 8.6 0.8

3254 Pressance Corporation 6.2% 29.8% 58.1% 14.8% 20.8% 93,348 5.5 1.2

3289 Tokyu Fudosan Holdings

Corporation 79.8% 21.5% 55.6% 7.9% 7.7%

386,421 10.7 0.8

8804 Tokyo Tatemono Co., Ltd. 114.7% 23.9% 56.2% 14.8% 6.8% 273,590 10.9 0.8

8830 Sumitomo Realty &

Development Co., Ltd. 96.2% 21.5% 62.8% 19.7% 11.3%

1,994,324 15.3 1.8

8840 Daikyo Incorporated 105.5% 65.2% 9.6% 5.9% 7.7% 249,519 17.0 1.4

8877 Nihon Eslead Corp. 5.8% 61.3% 22.8% 13.9% 11.7% 24,574 5.5 0.6

8897 Takara Leben CO., LTD. 46.0% 24.0% 59.8% 10.6% 18.6% 40,920 5.7 0.8

*The values compared are from the results of the previous fiscal year. Market cap, PER, and PBR are based on the closing price on December

10, 2018.

Compared with competitors, the scale of Pressance Corporation is not so large, but it has some notable characteristics: the

small amount of finished goods inventory and high profitability (ordinary income margin and ROE).

Meanwhile, PBR exceeds 1, but PER remains low. It is necessary to further increase investors’ awareness of the

company and to promote understanding of its growth strategy.

【Business contents】

Pressance Corporation has two business segments: “real estate sale business,” in which the company plans, develops, sells,

and manages studio condominiums for investment and family-type condominiums for actual residency. And in “other

business,” the company manages the lease of studio apartments for the benefit of the owners and the building

maintenance

◎Product mix

The lineup of the condominiums handled by the company are as follows:

The approximate average price of a property is 17 million yen for studio condominiums and 38 million yen for

family-type condominiums.

Type Residential area Layout Features Criteria for selection

Studio About 20 to 50m2

1ROOM to 1LDK

(L: living room, D: dining

room, K: kitchen)

Urban type

Within 5 min. on foot from a

major station

Convenient location

(Colleges, vocational schools, enterprises,

commercial facilities, etc.)

Family-type About 50 to 100m2 1LDK to 4LDK

Urban and suburban types

Within 10 min. on foot from

a major station

Environment-rich location

(Elementary and middle school areas,

enterprises, commercial facilities, etc.)

Combined About 20 to 100m2 1ROOM to 4LDK

Urban and suburban types

Within 5 min. on foot from a

major station

Criteria similar to those for studio

condominiums


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(Sales results for the fiscal year ended March 2018) (unit: million yen)

Product Type Amount sold Percentage No. of units Percentage

Studio condominiums 29,707 22.2% 1,726 33.8%

Family-type condominiums 71,156 53.1% 1,860 36.5%

Condominium buildings 19,318 14.4% 1,246 24.4%

Hotel property 2,744 2.0% 183 3.6%

Other housing 2,183 1.6% 85 1.7%

Other real estate 3,065 2.3% 2 0.0%

Business accompanying real estate sale 1,276 1.0% - -

Real estate sale business, Total 129,451 96.6% 5,102 100.0%

Others 4,607 3.4% - -

Total 134,059 100.0% 5,102 100.0%

* The sale of condominium buildings includes the wholesale of the entire or part of each condominium building to condominium dealers.

* The sale of other housing includes used houses and single-family houses, other than newly built condominiums.

* The sale of other real estate includes commercial stores and sites for development, other than housing.

* Business accompanying real estate sale includes the agent commission for condominium sale and paperwork accompanying real estate sale.

◎ Sales by region

The cumulative sales volume during a period from November 1998, in which the company started selling original brand

condominiums, to March 2018 are 593 buildings and 38,940 condominium units nationwide, mainly in the Kinki and

Tokai-Chukyo regions.

Pressance Shin-Kobe-Ekimae

(Kobe City)

Loger Shirakabe Hills

(Nagoya City)

(na

(

(

(Nagoya City)

Pressance Legend Sakaisuji-Honmachi

Tower (Osaka City)


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Prefecture No. of buildings No. of units

Osaka 264 17,672

Aichi 141 8,943

Kyoto 69 3,407

Hyogo 66 4,909

Shiga 9 1,355

Okinawa 17 833

Tokyo 13 743

Kanagawa 2 226

Others 12 852

Total 593 38,940

*Accumulated sales results from November 1998 to the end of March 2018

The company plans to enhance its brand, to increase market share further in the Kinki and Tokai-Chukyo regions and to

expand its business to Tokyo and Okinawa regions as well as new regions, such as Hiroshima and Hakata.

【Feature and advantage】

(1) Abundant past record of supplying condominiums and large market share

As mentioned above, the company supplies the largest number of condominiums consecutively not only in the Kinki

region, where it is headquartered, but also in the Tokai-Chukyo region. It also ranked second nationwide in 2017.

Its large share brings some significant advantages, including construction cost reduction and the enhancement of

information-gathering ability.

(2) Strong sales force

The company’s basic sales policy is to “sell all units before construction is completed,” and it has mostly executed.

On the sale of studio condominiums, the entire sales persons sell a piece of real estate during the same period of time. In

this way, in-company competitions are intensified, and sales motivation is kept high.

Since sales staffs sell only the brand developed by the company, they are the experts at the specs and features of their

condominiums so that customers rely on them.

In addition, the company makes efforts to cultivate potential customers in various ways such as holding a seminar and

also flexibly responds to the changes in demand and market conditions.

Personnel are the driving force for growth. Therefore, the company puts considerable energy into personnel education.

The strong sales force of the company originates from its vast educational effort.

It is important to train new employees in order to make them beneficial in actual business as soon as possible. The

company trains new employees to accompany their seniors and experience vital business scenes, such as talking with

customers and making documents. Consequently, accumulating successful experiences makes new employees to grow to

complete deals by themselves in a short period of time.

Because of these factors above, the company has sold out condominiums at an early point and has achieved stable sales.

(3) Competitive products

The customers are highly satisfied with “locations,” “facilities” and “prices.”

As for “locations,” the company puts importance on convenience within 10 minutes on foot from a major station,

especially in the urban area.

As for “facilities,” the company puts emphasis on luxury, comfort and functionality, placing high added value on real

estate by equipping a modular bathroom with a built-in dryer ventilator, floor heating systems with gas-heated hot water,


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soundproof window and noise insulation wooden floors as standard facilities.

As for “prices,” the company has achieved high cost-effectiveness by setting reasonable prices while keeping luxury.

Through these works, its condominiums possess high asset and brand values in the long term.

(Source: Pressance Corporation)

(4) Outstanding information-gathering ability

For condominium developers, it is vital to attain good information from brokers or financial institutions ahead of any

other competitors.

When other companies in the industry were stuck with a lot of finished goods inventory and could no longer procure new

land due to the Financial crisis, Pressance Corporation was financially doing well and recognized such situations as a

good opportunity to begin actively purchasing land. For land brokers, Pressance Corporation is the most important

customer since it actively procured lands even during the downturn in economy.

It is also beneficial to brokers that Pressance Corporation makes quick decisions, compared with other large companies.

As a result, Pressance Corporation won a reputation from land brokers as a trade partner with significant benefits.

Consequently, brokers started offering the latest information on land to Pressance first.

This relation has grown stronger and stronger after the aftershock of Lehman’s fall subsided and is one of the reasons

why the company is highly competitive.

Because of Pressance Corporation’s fast decision-making and strong brand power, an increasing number of brokers

contact Pressance first rather than other large developers even on large-scale projects.

(5) Stable earning power

Pressance Corporation was listed on the stock market in December 2007, and it has released its financial forecast 10

times from the fiscal year ended March 2009 to the fiscal year ended March 2018. Comparing the initial forecasts and the

actual results of sales and ordinary income, sales did not reach the initial forecasts a few times, but ordinary income has

never failed to reach the initial forecasts. Without being affected by the real estate market condition, the company can

earn profit stably and continuously. This is a remarkable feature of the company.


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【ROE analysis】

FY 3/13 FY 3/14 FY 3/15 FY 3/16 FY 3/17 FY 3/18

ROE (%) 18.5 18.2 18.9 19.4 19.2 20.8

Net income margin [%] 12.64 12.15 11.82 11.64 10.41 10.26

Total asset turnover [times] 0.74 0.75 0.74 0.70 0.65 0.62

Leverage [times] 1.98 2.01 2.17 2.38 2.83 3.25

A high ROE has been realized, backed by high net income margin.

Since the three indices (i.e. operating profit, ROE, and market capitalization) in the past 3 years satisfied certain criteria,

Pressance Corporation was included in JPX-Nikkei Index 400* in August 2015. In addition, the stock of the company

was designated as one of the stocks used for the new index “JPX-Nikkei Mid and Small Cap Index*2” in Dec. 2015. The

company plans to make efforts to keep ROE high.

*JPX-Nikkei Index 400

This is the share price index composed of the shares of “400 companies with high appeal for investors” which meet requirements of global

investment standards, such as efficient capital utilization and investor-focused management perspectives.

*2 JPX-Nikkei Mid and Small Cap Index

The range of small-to-medium-sized stocks is determined according to market cap and trading volume, and they are ranked according to ROE

and cumulative operating profit in the past 3 years. This is a share price index based on 200 stocks of companies that are attractive from the

viewpoint of investment, considering the qualitative conditions, such as the company having more than one independent outside director and

releasing English documents.

2. First Half of Fiscal Year ending March 2019 Earnings Results

(1) Consolidated Business Results (unit: million yen)

2Q FY 3/18 Ratio to sales 2Q FY 3/19 Ratio to sales YOY

Sales 66,241 100.0% 121,350 100.0% +83.2%

Gross profit 18,114 27.3% 34,562 28.5% +90.8%

SG&A expenses 7,126 10.8% 8,784 7.2% +23.3%

Operating profit 10,987 16.6% 25,777 21.2% +134.6%

Ordinary income 10,726 16.2% 25,583 21.1% +138.5%

Net income 7,239 10.9% 17,402 14.3% +140.4%

Sales and profits increased substantially.

Sales were 121.3 billion yen, up 83.2% year on year. Sales continued to be favorable.

Operating profit was 25.7 billion yen, up 134.6% year on year. SG&A expenses augmented 23.3% year on year, but they

were offset by increased sales, resulting in a substantial rise in profits.

Ordinary income was 25.5 billion yen, up 138.5% year on year.

(2) Trends by segment (unit: million yen)

2Q FY 3/18 Ratio to sales 2Q FY 3/19 Ratio to sales YOY

Sales

Real estate sale business 63,779 96.3% 118,498 97.6% +85.8%

Others 2,462 3.7% 2,851 2.4% +15.8%

Total 66,241 100.0% 121,350 100.0% +83.2%


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Operating profit

Real estate sale business 10,473 16.4% 25,350 21.4% +142.1%

Others 1,017 41.3% 1,045 36.6% +2.8%

Adjustment -502 - -617 - -

Total 10,987 16.6% 25,777 21.2% +134.6%

*The ratio to sales of operating profit means operating profit margin.

(Sales results) (unit: million yen)

Type Sales YOY No. of units YOY

Studio condominiums 29,780 +33.4% 1,638 +26.0%

Family-type condominiums 61,985 +159.5% 1,639 +141.0%

Condominium buildings 7,392 -44.7% 503 -38.9%

Hotel property 17,625 +1,573.4% 980 +1261.1%

Total sales of real estate sale business 116,784 +92.5% 4,760 +65.6%

* The sale of condominium buildings means the wholesale of the whole or part of each studio condominium building to condominium dealers.

The sales of studio condominiums including Pressance Itachibori Park City (148 units) and family-type condominiums

such as Legend Biwako (486 units) were healthy. The sales of condominium buildings decreased but were as planned.

(3) Financial position and cash flow

◎ Summary of Balance sheet (unit: million yen)

End of Mar.

2018

End of Sep.

2018

End of Mar.

2018

End of Sep.

2018

Current assets 227,161 242,193 Current liabilities 67,537 56,567

Cash and deposits 31,374 52,098 Trade payables 6,751 3,465

Real estate for sale 11,275 17,737 Short-term

interest-bearing debts 40,473 33,789

Real estate for sale in process 180,461 169,961 Noncurrent liabilities 102,689 110,357

Noncurrent assets 18,237 19,407 Long-term


Property, plant and equipment 14,493 14,900 Total liabilities 170,226 166,924

Intangible assets 431 378 Net assets 75,172 94,675

Investments and other assets 3,312 4,127 Equity 73,204 92,731

Total assets 245,399 261,600 Total liabilities and net assets 245,399 261,600

Balance of


＊Trade payables include electronically recorded accounts payable.

Increased sales (delivered property) led to a rise in cash and deposits. The amount of real estate for sale also increased. As

a result, total assets grew by 16.2 billion yen from the end of the previous term to 261.6 billion yen. Total liabilities

declined by 3.3 billion yen to 166.9 billion yen due to a decrease in trade payables, etc. Net assets grew by 19.5 billion

yen to 94.6 billion yen due to the rise in retained earnings. Equity ratio was 35.5%, up 5.7 points from the end of the

previous fiscal year.

The amount of acquired lands for condominiums, which is calculated by subtracting construction fees and other related

fees from the inventory assets in the balance sheet (the sum of real estate for sale and real estate for sale in process), was

43,337 million yen (9,159 units) for studio condominiums and 66,967 million yen (7,312 units) for family-type

condominiums. Pressance has obtained lands equivalent to roughly the next 3 years of sales for both studio


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condominiums and family-type condominiums. Similarly, the amount of acquired lands for condominium buildings was

13,421 million yen (3,116 units) and for hotel property sales 10,485 million yen (1,460 units), which means that the

company has already acquired lands for sale until the fiscal year ending March 2021.

◎Cash Flow (unit: million yen)

2Q FY 3/18 2Q FY 3/19 Increase/decrease

Operating CF -15,628 18,430 +34,058

Investing CF -896 -1,253 -356

Free CF -16,525 17,176 +33,702

Financing CF 25,210 3,020 -22,190

Cash and equivalents 37,143 49,538 +12,395

Operating CF and free CF turned positive due to the increase in income before income taxes, the decrease in inventories,

etc. The surplus of financing CF shrank as the income from the issuance of bonds with subscription rights to shares was

posted in the same period of the previous fiscal year but not in this fiscal year. Consequently, the cash position improved.

(4) Topics

◎ Rent properties under the company’s rental management show high occupancy rates.

（From the company’s material）

The overall occupancy rate of the rent properties under the rental management of the company at the end of September

2018 was 97.8%. As the graph above suggests, the number remained high, showing almost full occupancy.

One of the reasons behind the favorable sales of the studio condominiums is that investing purchaser can expect a

continuous rental revenue every month with almost no need to worry about vacancies. In addition, the number of units of

rental properties under the rental management of the company increased in proportion to the increased number of

condominium units sold, resulting in the expansion of stable earnings.


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3. Earnings Forecasts for Fiscal Year ending March 2019

(1) Full-year earnings forecast (unit: million yen)

FY 3/18 Ratio to sales FY 3/19(forecast) Ratio to sales YOY Progress Rate

Sales 134,059 100.0% 152,471 100.0% +13.7% 79.6%

Gross profit 34,484 25.7% 41,650 27.3% +20.8% 83.0%

SG&A 14,121 10.5% 17,108 11.2% +21.2% 51.3%

Operating profit 20,362 15.2% 24,541 16.1% +20.5% 105.1%

Ordinary income 19,858 14.8% 23,661 15.5% +19.2% 108.1%

Net income 13,757 10.3% 16,132 10.6% +17.3% 107.9%

*The estimated values are from the company.

No change in the forecast as of now. Forecasted double-digit increase in sales and profits this fiscal year

There is no change in the forecast as of now. Sales are expected to be 152.4 billion yen, up 13.7% year on year. Sales will

continue to be favorable overall this fiscal year. Gross profit margin is forecasted to rise by 1.6 points due to greater sales

of studio condominiums which have a relatively low-cost rate. SG&A expenses will also augment due to an increase in

human resources but will be offset by sales growth. Operating profit will be 24.5 billion yen, increasing by 20.5% year on

year. Record highs for both sales and profits are expected in this FY3/19. The company is proceeding with the transfer

(sales) of a large number of studio and family-type condominiums as per the initial plan, and the sales of condominium

buildings and hotel property are favorable as well.

Its dividends will be 35 yen/share annually. The dividend payout ratio is projected to be 13.0%.

(2) Secured amount for sales for this FY 3/19 (sales results + received orders)

Category

To be delivered this fiscal year Condominium sale business

No. of units Amount

(A)

Forecasted sales for

this fiscal year (B)

Rate of progress toward

forecasted sales (A ÷ B)

Single-room 2,252 41,052 41,951 97.9%

Family 1,920 71,772 74,027 97.0%

Sale of condominium buildings 879 12,446 13,083 95.1%

Hotel 980 17,625 15,429 114.2%

Total 6,031 142,897 144,492 98.9%

For the condominium sale business, 142.8 billion yen (6,031 units) is the sum of the sales result of 116.7 billion yen

(4,760 units) and the outstanding orders of 26.1 billion yen (1,271 units), which will be delivered during the current term,

at the end of September 2018. So 142.8 billion yen is the sales figure already secured and is equal to 98.9% of the 144.4

billion yen annual sales forecast.

As a feature of the company, a new accounting period begins with a high progression rate (rate of secured target sales).

As seen in the graph below, for the fiscal year ending in March 2019, the rates at every quarter are higher than the

previous two fiscal years, including the figure at the current period.


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（From the company’s material）

The cumulative bar chart above shows the backlog of orders which will lead to sales in the next fiscal year. The secured

sales for the next fiscal year were 58.4 billion yen at the end of the first quarter and 93.6 billion yen at the end of the

second quarter. The sales of the next fiscal year show steady progress even at this point of time.

(3) Real estate sale business (unit: million yen)

Type FY 3/18 Ratio to sales FY 3/19(forecast) Ratio to sales YOY Progression rate to

forecast

Studio condominiums 29,707 24.2% 41,951 29.0% +41.2% 71.0%

Family-type condominiums 71,156 57.9% 74,027 51.2% +4.0% 83.7%

Condominium buildings 19,318 15.7% 13,083 9.1% -32.3% 56.5%

Hotel property 2,744 2.2% 15,429 10.7% +462.3% 114.2%

Total sales of

condominium sale

business

122,926 100.0% 144,492 100.0% +17.5% 80.8%

Although it declined during the previous fiscal year., sales of studio condominiums are expected to see a substantial

increase. Sales of family condominiums will be steady. All business segments are progressing in accordance with the

plan.

◎ Hotel property development

The company has currently commercialized 21 hotels (19 of which are developed or under development, 1 being

renovated, and 1purchased). The company promotes the hotel property business from various directions based on the

following two scenarios, considering eventually selling them to REIT, investment fund or business entities.

For “To sell to other hotel business companies,” the hotel business companies or candidates to whom properties will be

sold have already been determined.

A To sell to other hotel business companies 19 properties

B To own hotels and outsource operations to other companies 2 properties


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Scheduled date

of completion Address Operation method Outline

Fiscal year

ending

Mar. 2018

Inari, Naniwa-ku, Osaka Delivered (April 2017) JR Namba Station,72units

Motomachi, Naniwa-ku, Osaka Delivered (October

2017)

JR Namba Station,111units

Fiscal year

ending

Mar. 2019

Minamisemba, Chuo-ku, Osaka Delivered (April 2018) Shinsaibashi Station of Midosuji Subway Line; 124 units

Hiranomachi, Chuo-ku, Osaka Delivered (April 2018) Kitahama Station of Sakaisuji Subway Line; 116 units

Nishimiyahara, Yodogawa-ku, Osaka Delivered (July 2018) JR Shin-Osaka Station; 120 units

Shikitsuhigashi, Naniwa-ku, Osaka Delivered (July 2018) Daikokucho Station of Midosuji Subway Line; 300 units

Tenjinyama-cho, Nakagyo-ku, Kyoto Delivered (September

2018) Shijo Station of Karasuma Subway Line; 63 units

Gojo-Omiyadori, Shimogyo-ku, Kyoto Delivered (September

2018) Omiya Station of Hankyu Line; 122 units

Yasaka-dori, Higashiyama-ku, Kyoto B(To be delivered next

fiscal year) Shimizu-Gojo Station of Keihan Main Line; 7 units

Gokodori, Chuo-ku, Kobe Delivered (September

2018) JR Sannomiya Station; 135 units

Fiscal year

ending

Mar. 2020

3-chome Nakadori, Akita(※) B(To be delivered next

fiscal year) JR Akita Station; 234 units

Nobori-cho, Naka-ku, Hiroshima A Ebisucho Station of Hiroden Main Line; 126 units

Minami-honmachi, Chuo-ku, Osaka A Honmachi Station of Midosuji Subway Line; 174 units

Aburakoji-dori, Shimogyo-ku, Kyoto A Gojo Station of Kyoto City Subway; 166 units

Kamikawabatamachi, Hakata-ku,

Fukuoka A

Nakasukawabata Station of Hakozaki Line of Fukuoka

City Subway; 204 units

Nishikujozao-cho, Minami-ku, Kyoto A JR Kyoto Station; 120 units

Oi-cho, Nakagyo-ku, Kyoto A Karasuma-marutamachi Station of Karasuma Subway

Line; 12 units

Fiscal year

ending

Mar. 2021

Onoe-cho, Naka-ku, Yokohama A JR Kannai Station; 277 units

2-chome, Nishi, Naha A Asahibashi Station of Okinawa Monorail; 240 units

2-chome, Motomachi, Naniwa-ku,

Osaka A JR Namba Station; 300 units

Sennichimae, Chuo-ku, Osaka A Namba Station of Midosuji Subway/Nankai Line; 182

units

*indicates renovated one.

4．Interview with Vice President Doi

We interviewed Vice President Doi about the present situation, new projects, etc.

Q: “There were many inappropriate incidents taking place in the real estate industry, but did they affect your

business anyway?”

A: “There was no negative effect. Rather, the situation has turned such that customers are now choosing our

company for its reliability and product superiority, and sales of studio condominiums are growing further than

before the incidents.”

To be honest, we were worried that people’s interest in real estate investment would decline, but the fear turned out to be

completely groundless.

When our sales staff asked customers about their views on the occurrence of those incidents, majority of them told us that


15

the incidents made them want to buy from a responsible, reliable and renowned real estate agent that provides sufficient

after-sales services, rather than refraining from investing while there was still distrust toward real estate agents.

These incidents will prompt customers to be more watchful for selecting a real estate agent.

In the midst of this, the situation has turned such that, thankfully, more and more customers are preferring our company

for its “product superiority,” such as location, price and quality, and “the company’s reliability,” such as brand value,

popularity, after-sales services offered with responsible rental management after the purchase, past performance as well

as sales volume. As a result, the sales of studio condominiums are growing further with the increases in the number of

new customers and the number of orders by 64% and 28% respectively during the first half of the current fiscal year than

the second half of the previous fiscal year.

We believe that our company’s share will increase further in the studio condominium market, and our dominant strategy

will function more effectively.

Q: “The extremely high occupancy rate of Pressance’s studio condominium is striking. What are the possible

reasons behind it?”

A: “We frequently collect information about the needs of occupants from the rental agents who are speaking on

behalf of them and reflect their needs in the process of building condominiums.”

It is obvious that a rental agent helping occupants would prefer “easy to promote and to be chosen” properties. Regarding

studio condominiums, we are happy that many rental agents prefer to promote Pressance’s condominiums first because of

their favorable conditions such as location, room layout, facilities and rent fee.

We frequently collect information about the needs of occupants from the rental agents who are speaking on behalf of

them and reflect their needs in the process of building condominiums. We have built a favorable cycle that the

condominium quality to satisfy occupants’ needs based on the collected information produces high occupancy rate, and

the high rate leads to the steady growth of condominium sales business conclusively.

Q: “Please tell us about your recent projects.”

A: “We have started a private lodging business in response to the rising demand of foreign tourists in Japan,

utilizing the know-how of condominium construction that we have developed so far. In addition, we will make

investments to enhance brand power and the level of recognition further and will engage in IT system

development in order to build closer customer relation. We strive to expand the scale of the company further, so

please look forward to our future business.”

Osaka is designated as an area of Special Zone Private Lodging, and therefore private lodging business can operate for

365 days a year. We considered starting a private lodging business in response to the rising demand of foreign tourists to

Japan, utilizing the know-how of condominium construction that we have developed so far. And we decided on having

a business alliance with the world’s largest private lodging operating company Airbnb Japan.

We will not be handling the private lodging itself, of course, but will be constructing buildings in appropriate location as

private lodging facilities after considering various conditions such as convenience of access and cost of construction

including acquisition cost of land. And we will lease them to the private lodging operating company. We are considering

to sell the buildings eventually.

As our first project, we are constructing a building exclusively for private lodging in Shin-Imamiya, Osaka, scheduled to

be completed in autumn 2019. JR/Nankai Dentetsu Shin-Imamiya Station, which is the nearest station and within walking

distance from the building. The location is highly convenient and is only around 40 minutes away from Kansai

International Airport by a direct train. Since a famous resort hotel is scheduled to open in its vicinity, higher demand for

the building is anticipated.

We plan to promote property development for private lodging further.

Also, we will make investments to enhance brand power as well as the level of recognition further and engage in IT

system development in order to build closer customer relation.


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As I already said, we are currently under a favorable situation that customers are more likely to prefer our company to

competitors. Taking this as a chance, we strive to expand the scale of the company further, so please look forward to our

future business.

5. Conclusions

A few scandals that were detected and related to investment properties only highlighted the strengths of Pressance.

As Pressance’s “strong selling power,” one of its strengths, allows sales staff members to build up successful experiences

under a favorable environment, they are able to grow faster, and some of the new employees are already acting as

important forces of the company only 6 months after they joined. This is resulting in further strengthening of the selling

power in addition to much lower turnover rate, and the operating base is becoming more solid eventually.

As Pressance will most likely achieve the goals for the whole fiscal year, its stock price, which has been trending down

for long, is finally reversing its course while TOPIX fell to the lowest level since the beginning of the year. We would like

to watch the future trend.

Relative stock price (3 months) Blue: Pressance Corp., Red TOPIX

<Reference1: Medium-Term Management Plan>

The company announced the 3-year medium-term management plan, which begins this fiscal year.

Outline

Performance goals Sales: 247.8 billion yen

Operating profit: 32 billion yen

Managerial goals Operating profit: over 10% y/y growth

Payout ratio: gradually increase to 20% in 5 years

Total dividend amount: 15% or greater y/y growth

The business strategies for achieving the goals are to expand the market share in existing major areas, including Osaka,

Kobe, Kyoto, Nagoya, the Tokyo Metropolitan Area and Okinawa. And it intends to strengthen market position in new

target areas, including Hiroshima, Hakata, and other local cities. Consequently, the company aims to increase the number

of supplied and sold condominiums that meet market needs and are highly convenient.


17

(Trends of Sales, Profit)

Both sales and profit are forecasted to increase at an annual growth rate of about 20% during the period of the

medium-term management plan.

As for the performance of each product category, the sales of studio and family-type condominiums are expected to

rise steadily. The forecasted annual average growth rate in the three years is 29.5% for studio condominiums and

21.8% for family-type condominiums.

Dividends

As mentioned above, the company will increase the total dividend amount 15% or greater from the previous fiscal year,

by “expanding the dividend resource (boosting operating profit 10% or greater from the previous fiscal year)” and

“raising payout ratio to 20% in five years.”

*To increase the total dividend amount 15% or over from the previous fiscal year

*To raise payout ratio to 20%

* Forecasted net income in the medium-term management plan

*No. of outstanding shares excluding treasury shares as of the end of March 2018: 59,953,448

Based on the above assumptions, the company forecasted the total dividend amount and EPS as follows.

FY 3/14 FY 3/15 FY 3/16 FY 3/17 FY 3/18 FY 3/19 FY 3/20 FY 3/21

Total dividend amount [million yen] 766 769 882 1,250 1,762 2,098 2,600 3,150

EPS [yen] 103 126 152 179 233 269 309 350

*The figures from FY 3/19 are for reference.

The total dividend amount and EPS will be increased 1.8 times and 1.5 times, respectively, in the next three fiscal years.


18

For achieving the forecasts

*Favorable progression of land acquisition.

The target total sales in 3 years of the medium-term management plan are 604.3 billion yen. The company has already

acquired land worth 142.1 billion yen necessary for achieving target sales in each fiscal year and is proceeding with

construction and sales.

In addition, the company has acquired land for its own property worth 6.3 billion yen.

*High rate of securing sales

As mentioned in the section “Earnings forecast for the fiscal year ending Mar. 2019”, 1271 units, 26.1 billion yen, is

scheduled to be delivered to customers in this fiscal year among the backlog of orders at the end of September 2018. As

of the end of the first half of Mar. 2019, the projected sales of this term adding actual sales of the first term 4760 units,

116.7 billion yen, is 6031 units, 142.8 billion yen.

This number accounts for 98.9% of the forecasted 144.4 billion yen sales of the condominium sale business.

As a feature of the company, a new accounting period begins with a high progression rate (rate of securing target sales).

For the fiscal year ending March 2019, the rate is higher than the past.

*Target performance achievements

The company, which was listed in December 2007, has announced financial results ten times between the fiscal year

ended March 2009, in which initial forecasts were announced for the first time, and the fiscal year ended March 2018,

and marked extremely high rates of achieving the initial forecasts.

Sales did not reach the forecasts in 2009 and 2010 in the wake of Lehman’s fall and in 2013 and 2014, in which the

company focused on profit. Operating profit did not reach the forecast only at the time of Lehman’s bankruptcy. Ordinary

income never failed to reach the forecast.

<Reference2: Regarding Corporate Governance>

◎ Organization category, and the composition of directors and auditors

Organization category Company that has an audit committee, etc.

Directors 11 directors, including 3 external ones

◎ Corporate governance report

Last modified: November 22, 2018.

<Basic policy>

We consider corporate governance as the principal framework within which the corporate management of the relationship

with various stakeholders, such as shareholders, customers, employees, business partners and local communities, is

conducted and believe that putting the followings into practice will shape such a framework.

We recognize the maximization of shareholder profit as our most important duty while putting the followings into


19

practice at the same time.

*Compliance with laws and regulations

We believe that good practice of compliance helps avoid direct damage caused by scandals and improve our brand value

and corporate image as the “trustworthy” and “sincere” company and further leads to enhancement of financial

performance from the medium to long-term perspective and higher corporate value.

*Risk management

We think risk management is about taking control of threats and risks of events or actions that prevent the company from

accomplishing its objectives with considering its cost-effectiveness.

*Accountability

As the word commonly means the responsibility to explain, we consider it as our duty to provide a logical explanation for

the consequences caused by the action authorities took and did not take.

<Major principles that have not been followed, and reasons>

The company states, “Our company conducts all the principle of the Corporate Governance Code.”

All principles are provided based on the Corporate Governance Code revised in June 2018.

<Major disclosed principles>

Principle Disclosed content

【 Principle 1-4 So-called strategically-held

shares】

(1) Pressance may hold the shares of a business counterparty, in order to

foster a good relation with the counterparty and conduct business

smoothly. The company will keep holding the shares of business

counterparty as long as they are considered to improve the corporate

value of the company, but the company will review them every year and

discuss the sale of the shares that are not worth holding while

considering share prices, etc.

(2) The basic policy is to exercise the voting rights for the owned shares

while considering whether or not business partners’ decisions would

improve the corporate value of Pressance.

【Principle 5-1 Policy for construction dialogue

with shareholders】

Pressance considers shareholders and investors as important stakeholders

and will make constructive communications with shareholders and

investors by using various opportunities, including general meetings of

shareholders, in order to achieve sustainable growth and improve its

corporate value.

・The communications with shareholders and IR activities are managed

by the directors in charge of the management department, making efforts

to actualize constructive communications with shareholders. For smooth

communications with shareholders, the accounting and general affairs

departments are supporting IR activities.

・As a means for communications with shareholders and investors, the

company holds interviews with shareholders and institutional investors

via securities firms.

・The director in charge in the management department reports the

opinions and worries of shareholders, which are grasped through the

communications with them, to the board of directors if necessary. And

the company reflects them to the business.

・The insider information in communications is handled in accordance

with the regulations for the management of insider transactions.


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This report is intended solely for information purposes, and is not intended as a solicitation for investment. The information and opinions

contained within this report are made by our company based on data made publicly available, and the information within this report comes

from sources that we judge to be reliable. However we cannot wholly guarantee the accuracy or completeness of the data. This report is not a

guarantee of the accuracy, completeness or validity of said information and opinions, nor do we bear any responsibility for the same. All rights

pertaining to this report belong to Investment Bridge Co., Ltd., which may change the contents thereof at any time without prior notice. All

investment decisions are the responsibility of the individual and should be made only after proper consideration.

Copyright (C) 2018 Investment Bridge Co., Ltd. All Rights Reserved.

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